Kenya is on its fifth university funding system in forty years. This one makes everything a loan

The Ministry of Education wants Parliament to end government scholarships for university and college students and fund everyone through loans.

The proposal sits in the Tertiary Education Placement and Funding Bill, 2026. Education Cabinet Secretary Julius Ogamba took it to the National Assembly’s Departmental Committee on Education at Bunge Towers on 5 August 2026. Under it, every student placed in a public university, college or TVET institution has 100% of their costs covered by the state, and the whole amount is recorded as a loan they must repay after they find work.

This is the legal machinery behind the promise President William Ruto made at State House on 21 July 2026, when he said every student who passes their exams and gets placed would receive full government funding from the September intake. The Standard reported on 7 August that more than 200,000 students due to join universities in September would be the first group affected.

To understand why this keeps happening, you have to look at what came before. Kenya has rebuilt higher education financing four times already.

How we got here

Before 1988, the state paid for everything. Government covered university costs in full and paid students a stipend on top.

The Kamunge Report of 1988 introduced cost-sharing. Government would pay KES 70,000 per student, parents would pay KES 16,000 in tuition, and students would take KES 50,000 as a loan for upkeep, accommodation and books. That loan arrangement was formalised when Parliament created the Higher Education Loans Board through the HELB Act in July 1995, with a mandate that also covered recovering older government loans issued to students from 1952 onwards.

Placement, meanwhile, ran through the Joint Admissions Board. JAB was made up of vice chancellors from the public universities plus Ministry of Education representatives, and it decided who got a government-sponsored slot. Entry was rationed by grade. In some years JAB set the cut-off at B for boys and B minus for girls, the lower female threshold being a deliberate affirmative action measure, and it pushed the bar higher when too many candidates qualified. Students who missed out could pay full market rates for the same degree through Module II, the parallel programmes.

Those parallel programmes became the thing keeping universities solvent. They also created the odd situation where two students sat in the same lecture hall, one funded by the state on merit and one paying several times more for the identical course.

The Universities Act of 2012 disbanded JAB. The Kenya Universities and Colleges Central Placement Service replaced it, taking over applications from the 2013 KCSE cohort and extending placement to diploma courses and private institutions, which JAB had never handled.

In 2016 the parallel programme money disappeared. Then Education Cabinet Secretary Fred Matiang’i’s crackdown on exam cheating cut the number of candidates scoring C+ and above sharply. Fewer qualifiers meant fewer paying Module II students, and the revenue that had propped up public universities went with them.

From the 2017/18 financial year, government moved to the Differentiated Unit Cost (DUC). Programmes were sorted into 14 clusters, each with a fixed annual training cost ranging from about KES 144,000 for general arts to KES 600,000 for dentistry. Government promised 80% of that cost as a block grant to the institution, with the remaining 20% coming from student fees and other university income.

The 80% never arrived. HELB’s own figures put the actual allocation at 66% when DUC started in 2017/18, falling to 48.11% for public universities by 2021/22. Ruto put it plainly at State House in July 2026: “We tried the Differentiated Unit Cost, it didn’t work and it made most of our universities almost close down; because while we promised 80 per cent funding, we went down to 40 per cent and most universities suffered.”

In May 2023 came the Student-Centred Funding Model. Money would follow the student rather than the institution. A Means Testing Instrument scored household circumstances, and students were sorted into bands. The Universities Fund paid a scholarship covering between 30% and 70% of tuition, which was a grant nobody repaid. HELB covered part of the rest as a loan, plus an upkeep loan. The family paid what was left. We explained how the bands worked and what each one paid when the model first appeared in admission letters.

The Presidential Working Party on Education Reform, chaired by Professor Raphael Munavu, had proposed four categories. Implementation turned them into five.

The model went wrong quickly. Over 10,000 students appealed their allocations. Assessment relied partly on chiefs and local pastors verifying household circumstances, which produced obvious problems. Students protested in September 2024. The High Court suspended the model on 3 October 2024, and on 20 December 2024 Justice Chacha Mwita declared it unconstitutional for lacking public participation and discriminating between students. The Court of Appeal stayed that judgment on 26 March 2025, letting the model run while the appeal proceeded.

Then it was revised while still in force. On 22 August 2025 HELB announced it had abolished bands altogether. Each student’s allocation would instead be set individually, using the Means Testing Instrument for need and real-time institutional data for programme cost. Separately, programme costs themselves were cut from 1 September 2025 on a review committee’s recommendation.

So the count is: full state funding, then cost-sharing with HELB loans, then block grants under DUC, then means-tested bands, then means-tested individual allocations. The Bill now before Parliament is the fifth structure, and it arrives just three years after the fourth one launched.

What the Bill changes

Three things happen at once.

The Bill merges the Higher Education Loans Board, the Universities Fund Board and the TVET Funding Board into one body called the Tertiary Education Funding Authority, or TEFA, running a single pot of money and a single database of every beneficiary.

This part is not new thinking. Recommendation 15 of the Munavu report, published in 2023, asked government to “enact the proposed Tertiary Education Placement and Funding Bill to amalgamate HELB, UFB and TVET Fund”. The same report also produced the banded model that collapsed. The merger recommendation simply sat unimplemented for three years.

Second, placement separates from funding. KUCCPS becomes the placement body for all tertiary institutions, and admission turns on grades and course choice alone. Money is decided separately, afterwards. Principal Secretary for Higher Education Beatrice Inyangala told the committee on 6 August that funding would follow the student rather than the institution, and that loans would go to students at private universities too.

Third, scholarships end and loans replace them.

One detail muddies this. Ministry officials also told MPs the Bill keeps means testing, using household income, special needs status, affirmative action and the cost of the course to set the level of support. What means testing appears to determine now is the size of the loan rather than whether any part of it is a grant.

Continuing students stay on the current arrangement. Only new entrants come in under the new one.

How repayment would work

Graduates start repaying one year after finding work. Those in formal jobs must tell their employer about the loan so it can be deducted from salary. Those working informally negotiate a repayment plan with the new authority directly.

Deductions would be capped at 25% of earnings.

That 25% has been reported elsewhere as a sharp rise from a current 4%. The two numbers measure different things. HELB’s own published handbook states that monthly instalments “should not exceed 25% of a loanees’ basic pay”, so the ceiling already exists. The 4% is the annual interest rate HELB charges on undergraduate, TVET and KMTC loans, and HELB has said that rate is unchanged.

One provision does improve on what students face today. A graduate who stops repaying because they lost their job would not be penalised, and missed payments would move to the end of the loan term instead of attracting default charges. At present HELB charges a penalty of at least KES 5,000 for every month a mature loan goes unpaid, lists defaulters with credit reference bureaus, and can pass the file to debt collectors at the borrower’s cost.

The Bill also lets TEFA sue persistent defaulters and pursue borrowers who have left the country. Last year HELB sought access to KRA and NTSA records to find defaulters who had bought cars while their loans went unpaid.

Why the government says it had to do this

David Ndii, who chairs the President’s Council of Economic Advisers, set out the numbers on X on 6 August. Higher education enrolment is projected to rise from about 1.2 million students in 2026/27 to nearly 2.5 million by 2030/31. Funding requirements over that period go from KES 176.4 billion to KES 450 billion, while the budget allocation stays at roughly KES 96.8 billion. The gap widens from about KES 80 billion to about KES 350 billion.

“Either we reduce numbers, underfund massively, or finance differently,” Ndii wrote. “If you have ideas, we are all ears.”

The Daily Nation reported in July that HELB needs KES 112.1 billion for 2026/27 and received KES 56.3 billion. Ogamba told a Senate committee on 23 July that 23 institutions were close to insolvency. Pending bills across public universities, covering unremitted SACCO and statutory deductions, unpaid suppliers and part-time lecturers, stood at KES 85 billion in July 2025.

Ministry officials told MPs the new model starts with about KES 100 billion pooled from existing allocations: roughly KES 56 billion from HELB, KES 30 billion from the Universities Fund and KES 9.6 billion from TVET scholarships. That is the same money reorganised, and it does not close the gap.

The extra is meant to come from capital markets. HELB chief executive Geoffrey Monari told the committee the authority would run a bond programme paying quarterly coupons rather than asking Treasury for more. In June he described a social bond backed by HELB’s existing loan repayments, discussed with the World Bank, opening with a tranche of about KES 500 million. Malaysia, Colombia and Chile have tried similar structures.

The design depends on repayment. Money from today’s graduates secures the bonds that fund tomorrow’s students, who become the next set of repayers. Monari said that as of 30 June 2025, 32.5% of HELB’s loan book was in default, with about 256,000 Kenyans holding KES 32 billion in unpaid loans.

What is not settled

Parliament has passed nothing. The Education Committee, chaired by Tinderet MP Julius Melly, finished its consultative review on 6 August, and MPs are expected to propose amendments before the Bill reaches the floor. Several have already asked what happens to students from low-income households once grants disappear.

There is also confusion about which law does the work. On 21 July the President said free university education would be anchored in the Higher Education Loans Board (Amendment) Bill, 2026, while the Ministry of Education points to the Tertiary Education Placement and Funding Bill, 2026. The Daily Nation flagged the contradiction in an editorial on 24 July, and it has not been resolved publicly.

Three things are worth watching: whether the printed Bill eliminates grants outright or keeps them for the neediest students, whether MPs amend the loan-only structure before the vote, and whether Parliament passes anything before the September intake. KUCCPS is placing this cycle from a pool of 268,700 candidates who scored C+ and above, and those students need to know their terms before they report.

The direction across all five systems has been consistent. In 1988 the state paid KES 70,000 and the family paid KES 16,000. Under DUC the state was meant to pay 80% and paid less than half. Under the banded model families paid a share set by a means test that many disputed. Under this Bill families pay nothing up front and the graduate carries the entire cost afterwards. Each redesign has been presented as a fix for the last one, and each has moved more of the bill away from the Exchequer.